Chief executive officers’ pay is shattering the glass ceiling.
Sixteen women heading companies in the Standard & Poor’s 500 Index averaged earnings of $14.2 million in their latest fiscal years, 43 percent more than the male average, according to data compiled by Bloomberg News from proxy filings. The women who were also CEOs in 2008 got a 19 percent raise in 2009 -- while the men took a 5 percent cut.
“When you see numbers like this, one can truly say that the glass ceiling in corporate America has been shattered,” said Frank Glassner, CEO of San Francisco-based Veritas Executive Compensation Consultants LLC. “I don’t remember seeing women ever getting paid more than men.”
Graef Crystal, a pay expert who analyzed the data for Bloomberg News, said that “compensation committees are saying we don’t want to have any trouble” over underpaying women, “so if we err, let’s err on the side of giving them too much.”
Darwinian competition is also playing a role, said Sheila Wellington, a professor of management and organizations at New York University who studies women business leaders.
“These are the strongest, fittest and toughest who survive,” according to Wellington, who said she was offered half the salary of male peers for her first job at a mental health facility in 1968. “They’ve had to negotiate all the way up the ladder.”
An Unusual Option
Compensation consultant Todd Gershkowitz, senior vice president of Los Angeles-based Farient Advisors, said he couldn’t recall a female CEO ever receiving as much as the 61- year-old Bartz. Her package was bolstered when she joined in January 2009 by a five-million share options grant from Yahoo, valued at $27.2 million, and a $7.5 million share grant.
The option is unusual in that it begins to vest, or become cashable, if Yahoo stock hits and stays above $17.60, or 50 percent above its $11.73 price on the date it was granted, for 20 straight trading days before 2013, Crystal said. Most options vest on a fixed timetable, irrespective of price. Yahoo, based in Sunnyvale, California, rose above the $17.60 level last month, falling before the option could vest.
“Welcome aboard” packages are standard fare for new CEOs. Yahoo went overboard when it added $7.4 million in additional stock and options to Bartz’s pay just 25 days after the initial award, Crystal said.
“Why does she need to eat again 25 days after she swallowed an entire pig?” he said. “Some pythons need to rest before another meal.”
The $42 million value attributed to the option and stock grants in Yahoo’s compensation disclosure wasn’t realized in 2009 and is linked to “increases in long-term shareholder value” and individual and company financial performance, said Dana Lengkeek, a Yahoo spokeswoman.
In the broader workforce, women working at least 35 hours a week in the first quarter of 2010 received 79 percent of the wages earned by men, according to the U.S. Labor Department. Female heads of companies of all sizes made about 75 percent of what men did in a 2009 department survey of 1.1 million CEOs. About 24 percent were women.
Pay riches for women CEOs at big companies may be “an important indicator, but not a milestone because of what happens down the line” among average workers, said Robin Ferracone, founder of Farient.
Rosenfeld’s 41 Percent
“Even at the CEO level, with equal pay comes equal scrutiny and a narrower band of acceptable behavior,” said Ferracone, whose clients have included Margaret Whitman, the former EBay Inc. CEO, and Carleton Fiorina, the former head of Hewlett-Packard Co.
At Kraft, Rosenfeld received a 41 percent raise last year as the shares fell behind the S&P 500’s performance by 21 percentage points. In a Crystal model that adjusted pay for shareholder return, she would have taken an $18 million pay cut, and was rated as the 16th most overpaid CEO among 271 studied.
Crystal looked at S&P 500 companies that had filed 2009 fiscal year proxies by April 16. (Click here to see a sortable table and other interactive graphics on CEO pay.)
Rosenfeld, 57, was awarded $10.6 million in a performance- based bonus, which Kraft’s proxy attributed in part to her pursuit and acquisition of Cadbury Plc, which made Kraft into the world’s largest confectioner.
To win Cadbury, Rosenfeld had to stand up to Warren Buffett, CEO of Berkshire Hathaway Inc., which has an 8 percent stake in Kraft. Buffett said Kraft made “dumb deals” by overpaying for Cadbury and selling its pizza brands.
When asked about Rosenfeld’s pay at Berkshire’s annual meeting, Buffett said, “We’ve got a compensation system at Berkshire which I regard as quite rational and there’s a lot of companies in the U.S. that have different compensation systems,” according to the Daily Telegraph of London.
Michael Mitchell, a spokesman for Northfield, Illinois- based Kraft, said company officials “strongly believe” the Cadbury acquisition was “absolutely the right decision” and will boost earnings. The pay package for Rosenfeld, who led Kraft to “strong operating results in 2009” in an “extremely volatile and challenging operating environment,” was driven by a payout from a 2007-2009 long-term incentive plan, he said.
Extended Holding Requirements
Other female CEOs in the S&P 500 considered overpaid in 2009 in the Crystal model were Susan Ivey of Reynolds American Inc., Mary Agnes Wilderotter of Frontier Communications Corp. and Indra Nooyi of PepsiCo Inc.
Shareholders at Reynolds last week defeated a resolution that would have required an extended holding requirement for stock awards. Ivey received $6.24 million in stock last year. A similar resolution is pending a vote at Frontier, where Wilderotter got $3 million in stock.
“We’re concerned their high levels of stock compensation and lack of holding requirements could mean pay isn’t sufficiently tied to performance,” said Brandon Rees, deputy director of the office of investment for the AFL-CIO, a supporter of the resolutions.
Debra Cafaro, CEO of real estate investment trust Ventas Inc. for the past decade, received $6.25 million last year, and was rated as underpaid in the Crystal model. She took an 18 percent pay cut in 2009. Ventas has been the best performing stock in the S&P 500 financial sector under her tenure, with a 35 percent compound annual return for shareholders.
Twice as Likely
“Once you’re in the CEO seat, I believe directors use a very even-handed approach to compensation,” Cafaro, 52, said. “But getting there can be a different story and women executives may be judged more critically.”
Ventas returned 12 percentage points above the S&P 500 last year for shareholders. Cafaro’s base salary and non-equity incentive compensation were increased by 3.5 percent and 33 percent, respectively, while her equity awards decreased 34 percent.
“The compensation committee believes the CEO should have the greatest alignment with our shareholders, and, therefore, her compensation structure was designed to reflect a higher sensitivity to our performance than the compensation structure of other named executive officers,” a company filing said.
Women CEOs are almost twice as likely to have been named to the job from outside, as Cafaro was, than from within, according to a Harvard Business Review study by Herminia Ibarra, a professor of organizational behavior, and Morten T. Hansen, a professor of entrepreneurship.
There is a strong market for “outside-the-mold” candidates today and not a huge supply, so there’s no surprise it’s reflected in their salaries, Ibarra said.
Being brought in means they’ll be paid a premium, Farient’s Ferracone said. Companies are emphasizing diversity and having a woman at the helm fulfills that agenda, which can lead to an advantage when negotiating pay, Ferracone said.
“Having a female CEO is an opportunity to blaze a trail, so some companies will say, ‘What do we have to do to get her?’” said Andrew Oringer, a compensation and benefits lawyer at law firm Ropes & Gray in New York.